vol. XVII no. 3

				Page 2 Page 1 2 3 4 According to Mutchler, a key element of ERM is a focus on the positive aspects of risk. "ERM lets management examine how they can take advantage of some risks and manage them to the point that they are taking advantage of opportunities generated by the risks, which is why we refer to it as 'risk management' rather than 'risk control.' " But there's some debate over whether ERM is just the latest buzzword or if it's business's "holy grail." Following the passage of the Sarbanes-Oxley Act, which was a direct response to the accounting scandals surrounding Enron and other companies, those in the accounting profession have embraced ERM and see it as vital to the future success of businesses. Sarbanes-Oxley mandates stricter corporate governance and greater accountability on the part of the CEO and CFO, who now, according to the legislation, must certify all financial statements. Therefore, according to those in the accounting profession, everyone from the CEO and CFO to the audit committee will need to have a better grasp of the company's risks. "Incorporating an ERM model will enhance the quality and integrity of internal and external reporting," said Mutchler. "And while Sarbanes-Oxley doesn't specify anything about better risk management, it certainly can and should be the catalyst companies need to institute an ERM approach." One of the critical roadblocks for many companies has been the lack of guidelines to help them identify the components needed to incorporate ERM. On September 29, 2004, the Treadway Commission's Committee of Sponsoring Organizations (COSO) released the Enterprise Risk Management - Integrated Framework. COSO, a voluntary private-sector organization formed in 1985 to combat fraudulent financial reporting, produced the framework in an effort to help jumpstart the use of ERM in corporations. "We recognized that while many organizations may be engaging in some aspects of ERM, there has been no common base of knowledge and principles to enable boards and senior management to evaluate an organizational approach to risk management," said John Flaherty, chairman of COSO, in his release statement. Previous Page | Top | Next Page

Copyright © 2005 Robinson College of Business/Georgia State University.